On July 8, 2009, the British Columbia Court of Appeal released its decision in Shapray v. British Columbia Securities Commission. The appellant was Howard Shapray, a commercial litigator in Vancouver who often acts on behalf of individuals who were subject to and directly affected by s. 148(1) of the Securities Act (British Columbia) (the “Act”). Section 148(1) of the Act, much like provisions contained in other provincial securities legislation, prohibits, without the consent of the British Columbia Securities Commission (the “Commission”), the disclosure of any information or evidence obtained or sought to be obtained pursuant to an investigation order of the Commission, and the disclosure of the name of any witness examined or sought to be examined pursuant to such an order. It contains an exemption in relation to disclosure to the person’s legal counsel. According to Mr. Shapray, s. 148(1) prohibits “innocent and otherwise lawful speech” and was not demonstrably justified by s. 1 of the Charter of Right and Freedoms (the “Charter”). Practically, Mr. Shapray argued that, as counsel for targets and witnesses in Commission investigations, his ability to “properly respond to and defend disputed allegations of misconduct or to otherwise prepare a [w]itness to give evidence under oath” was seriously hampered in that he was unable to gather evidence from third parties or speak to other witnesses.

The chambers judge dismissed the application, finding that the prohibition on disclosure was limited in time (in that it expired once a notice of hearing was issued, or after six years) and in scope (in that it did not interfere with solicitor-client communications and did not prevent counsel from discussing the fact or events at issue). The chambers judge concluded that the minimal impairment test under s. 1 of the Charter had been satisfied and that the benefits of the provision (namely the preservation of evidence and the protection of the markets, listed corporations and investors against premature and potentially incorrect information about investigations) outweighed the detrimental effects on the right to freedom of expression.

The Court of Appeal unanimously allowed the appeal and held s. 148(1) invalid. The Court agreed with Mr. Shapray that a target of an investigation had an interest in having counsel attempt to clarify facts, speak to and prepare witnesses, and obtain relevant documents in the possession of third parties. The ability to obtain the Commission’s consent did not save the provision because no guidance was provided as to when such consent would be granted and in order to obtain consent, a lawyer was forced to disclose information that he or she would not otherwise find it prudent to disclose. The Court was not satisfied that the blanket prohibition on disclosure contained in the impugned provision could be said to fall within a range of reasonable alternatives that minimally impaired free expression, noting that because it was first enacted in 1930, decades before the Charter, the Legislature had never had an opportunity to consider less invasive methods to achieving its objectives. To permit the Legislature sufficient time to consider how to achieve those objectives in a manner consistent with the Charter, the Court delayed the coming into effect of the order of invalidity for a period of 12 months.

If it stands, the Shapray decision will likely have a significant impact on disclosure prohibitions in securities legislation across the country.